No action against lawyers, law firms for GST non-compliance, rules Delhi HC

The Delhi High Court has directed the Centre not to take any coercive steps against lawyers and law firms for not registering or complying with the Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act or the Delhi Goods and Services Tax (DGST) Act, till a clarification is issued by the appropriate governments.

The bench comprising Justice Muralidhar and Justice Pratibha M Singh also asked the Centre to clarify whether services of lawyers and law firms come under the GST, after concluding that there exists no clarity on whether all legal services would be governed by the reverse charge mechanism. The orders were passed on a petition by J K Mittal, owner of a Delhi-based law firm, seeking the quashing of notifications issued by the Centre and Delhi governments according to which GST is to be paid by advocates and law firms on all services offered by them, apart from representing clients in courts and tribunals.

The high court passed the directions after concluding there was prima facie merit that lawyers and law firms were faced with a genuine doubt regarding the legal requirement for registration under the new tax regime. The bench also said that if all legal services were to be governed under the reverse charge mechanism, there would be no purpose in getting registered under the CGST, IGST and DGST Act. In such a case, those seeking voluntary registration could anyway avail the facility under Section 25 of the CGST Act and the corresponding provisions of the other two laws.

The petitioner has claimed that for representational services, the client (receiver of the service) will have to pay GST as per the relevant notifications and also alleges that the Centre and Delhi governments have failed to follow the GST Council recommendation that lawyers and law firms should be exempt from registration requirements. The petition also says that the government notifications are not in consonance with the CGST, IGST and DGST Acts and Article 279A of the Constitution and will have a negative impact on the legal sector. It also questions the need to re-register a legal professional who has already been registered under the Finance Act of 2011 and asks for these lawyers to be exempted from such requirements.

The matter has been posted for further hearing on July 18.

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